CHICAGO — Missouri Gov. Eric Greitens’ resignation amid ongoing legislative and criminal probes doesn’t raise any red fiscal flags for municipal bond market participants.
After resisting bipartisan calls in recent months for his resignation, the first-term Republican governor abruptly announced on Tuesday that he would step down on Friday. The state’s reins will go to Lt. Gov. Mike Parson, a Republican. In Missouri, the lieutenant governor is elected in a seperate election from the governor's race, and Parson won the 2016 race with 53% of the vote.
While the scandal and the governor’s resignation have garnered national headlines, several municipal bond market participants see little impact on the state’s market standing, or view any potential impact as potentially positive.
“This is a non-issue,” said Tom Schuette, co-head of investment research and strategy at Gurtin Municipal Bond Management. “I don’t believe the market was treating the state’s constitutional crisis surrounding the impeachment process as any sort of a credit risk. So the resignation is unlikely to change market perception at all – and if anything, it likely ensures a smoother budget process moving forward.”
The state carries triple-A ratings from S&P Global Ratings, Fitch Ratings and Moody's Investors Service.
“A governor’s resignation in and of itself will not result in a credit impact. We continue to view Missouri’s financial management practices as good under our analytical framework,” said S&P's primary Missouri analyst, Oscar Padilla.
Howard Cure, director of municipal bond research at Evercore Wealth Management LLC, said the absence of financial misconduct in the allegations against the governor helps insulate the state’s credit quality.
“It’s not as if the governor was going to be impeached based on gross fiscal mismanagement,” Cure said. “The state has a reputation as being fiscally conservative with strong finances and a low pension liability.”
The new governor inherits some challenges.
“The state’s economic growth lags the U.S. Also there are going to be phased in income tax cuts so it may be more difficult to balance the budget," Cure said. "You may see similar problems that arose when in its neighbor, Kansas, made tax cuts without closing loopholes and cutting expenditures.”
A St. Louis grand jury earlier this year indicted Greitens on a felony charge of invasion of privacy stemming from alleged actions tied to an adulterous relationship in which he was accused of using a taking a compromising photograph to keep the woman silent prior to his election. Greitens has denied the criminal accusations, although he has acknowledged a consensual relationship with the woman.
Jury selection began in mid-May but then St. Louis Circuit Attorney Kim Gardner abruptly dropped the prosecution after the judge said she could be called as a witness by the defense. She said a special prosecutor would refile the case.
The heat on Greitens remained as legislative leaders said the move would not impact their decision to potentially pursue impeachment. While Greitens enjoyed wide GOP majorities in the legislature he often clashed with lawmakers.
The legislature had been meeting in special session to continue its investigation of the governor’s actions and Greitens had been subpoenaed to testify next Monday. The special session began after the legislature’s regular session concluded during which lawmakers signed off on a $29 billion fiscal 2019 budget.
Greitens was also facing a felony charges for allegedly tampering with computer data to defraud or obtain property. Those charges stem from his alleged use of a donor list from a charity he founded, The Mission Continues, to benefit his campaign.
After Greitens’ resignation announcement, Gardner said a “resolution” had been reached over the pending criminal charges. More information was expected to be released Wednesday. A county probe is continuing.
Greitens, a former Navy SEAL who was a political novice, attacked the investigations being conducted by prosecutors and the legislature over his alleged sexual misconduct during an extramarital affair and campaign finance abuses.
“It’s clear for the forces that oppose us there’s no end in sight. I cannot allow those forces to continue to cause pain and difficulty to the people I love,” Greitens said. “I know and people of good faith know that I’m not perfect, but I have not broken any laws or committed any offense worthy of this treatment.”